Something that has no physical presence consume as much electricity as the whole of a country?
The internet has recently been flooded with claims that the digital currency Bitcoin could be using more electricity than a number of developed countries. Therefore, the Reality wants to know: how do they work and is it true?
Even if it has been around since 2009, the digital currency, or crypto-currency, has dominated headlines across the world recently due to his surge value.Bitcoin: the origin of the gold rush?
Unlike banknotes or coins in your pocket, the Bitcoin is not printed by the government or the traditional banks and largely exists online.
Around 3,600 new bitcoins are created every day through a complex process known as “mining,” where computers are rewarded with bitcoin for the processing of mathematical equations using specialized software.
Except that this is not just a handful of computers in the treatment of these equations, but thousands of machines all over the world, of the race of the day and of the night – it is a lot of electricity.
And as bitcoins increase in value, more and more machines are being plugged in and turned on by amateurs and professionals alike to mine.
Given their digital nature, there was, of course, more and more curiosity about how much electricity is used to produce bitcoins.As much electricity as Denmark’
Social media platforms such as Twitter are, unsurprisingly, full of claims about Bitcoin’s energy consumption.
The end of the Twitter post by @EricHolthaus
The end of the Twitter post by @GCochevelou
Therefore, comparisons such as this correct?
The short answer is that it is very difficult to say, because there is no recognized authoritative sources on the energy consumption for digital currencies such as Bitcoin.
Its peer-to-peer nature makes it very difficult to get a glimpse of anything other than the value of the digital currency itself.The operational costs
But people have tried. A widely used formula for calculating the energy consumption of the crypto-currency blog Digiconomist, which is based on the performance specifications of the common extraction technology.
It takes the total revenue from mining as a point of departure, the estimated operating costs for the minors as a percentage of their income, and then converts these costs to the energy consumption based on average electricity prices.
According to this method, Bitcoin’s current annual electricity consumption is estimated to be 32.56 terawatt-hours (TWh).
It is the way in which the comparisons with the all countries are in the process of being made.
For example, the Eurostat data show that in 2015, the Denmark consumed 30.7 TWh of electricity and the Republic of Ireland consumed 25.07 TWh.
So, if we are to use this measure, then yes, you could say that the comparisons on Twitter are generally correct.
But as this method uses assumptions and estimates, something that Digiconomist readily admits, it should come as no surprise that this is not without its detractors.
One analyst, Marc Bevand, supports this method is bad because it does not take into account more recent and more energy-efficient technologies used by minors, adding that it is “the mistaken assumption that a” 60% “of the mining revenues are spent on electricity”.
When American business magazine Forbes reported at the end of the month of October as Bitcoin is estimated, the market capitalisation of the value – the overall value of an object, the entity had surpassed those of household names such as Goldman Sachs and eBay, it was inevitable that the crypto-currency may soon become the object of comparisons with whole countries.
But no matter how you choose to measure the energy consumption of Bitcoin and other digital currencies, there remains at least one area of consensus.
As with any product, digital or physical, his future will ultimately be determined by how profitable it is to produce.
The total number of bitcoins in circulation currently amounts to $ 16.7 million, which will continue to increase until they reach $ 21 million – the total amount of the supply set of the settlement currency.
As long as electricity remains cheap and reliable, the technology is easily available, and the value of the digital currency high enough to easily absorb the costs of production, Bitcoin is likely to continue to generate titles until it reaches its maximum circulation.
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